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Buildings and Infrastructure

Supplying products for the global construction industry and home improvement sector is a vital part of our business. We provide paints, coatings and specialty chemicals that are either used in the manufacture of building and infrastructure materials, or are used to coat the interiors and exteriors of buildings and other structures.

42% of revenue

Trends

A notable feature of this end-user segment is its very strong regional component, particularly in the New build projects and Maintenance, renovation and repair sub-segments. Over the last few years, market growth has been disproportionately high in countries such as China, India and Brazil. Looking ahead, we expect growth to fall slightly in Brazil and India, while in China, growth is expected to be much lower than it has been. In the New build projects sub-segment, this slow down is particularly marked. Meanwhile, analysts predict that growth in the US will be higher than in Brazil, Russia and India combined, with particularly strong growth in the New build projects sub-segment.

The outlook for Europe is much less clear. Unlike the US – where the Buildings and Infrastructure end-user segment has more or less returned to 2008 levels – in Europe, output is still far below 2008. Therefore, at the beginning of 2014, most analysts anticipated a return to growth in Europe. As the year progressed, analysts continued to forecast reasonable growth, with the expectation that 2008 output levels would be reached again in 2018 or 2019. Growth rates were expected to be roughly equal in New build projects and Maintenance, renovation and repair, with the latter of particular relevance to our activities.

However, by the end of 2014, it was difficult to determine whether this recovery was actually occurring and, in particular, if it was as strong as it was expected to be. Therefore, although we continue to see robust growth estimates from analysts, internally, our estimates for European market growth are more conservative.

Future sustainability developments

Based on the World Business Council for Sustainable Development (WBCSD) Vision 2050, 70 percent of the world’s population will live in urban areas, while 95 percent of new building stock will use zero net energy. The proportion of buildings heated by fossil fuels will also fall below 6 percent. Sustainability issues beyond energy use and carbon emissions, such as air quality, will continue to have an impact.

Implications for strategy and actions

In high growth regions, we must make more use of the product and margin management approaches that we are already successfully utilizing in more mature geographies. At the same time, we have to recognize that with considerable population growth and continued increases in wealth, we still have a significant task in terms of market and brand building in these geographies. In Europe we need to focus on flexibility and responsiveness so that we can capture the growth if it does occur, but manage our costs if it does not materialize.